marty feldstein. and sam nunn dave cote and adam parker. the air ris auto show is under way in france and we'll get behind the way with daimler chairman at 6:15 eastern time. plus the count town continues to election day. our guest this half hour is former new mexico governor bill richardson. he's walking up to set right now. we have a lot to get to with him. and later this morning, staple's co-founder and romney supporter tom stemberg. no one understands the swing state of ohio better than senator rob portman. he'll be joining us from cincinnati. but before we get to all this, and believe me, this is a lot to get on today, let's get you up to speed on this morning's other top headlines with andrew. welcome back. >> thanks. we haven't even talked about football, but i hope we get a chance to. china central bank reportedly

injecting 57.9 billion into money markets. regulators are struggling to maintain liquidity without the injection. speaking of china, the country's largest listed steel maker has suspended output at a plant as the economy slows and demand weakens. meantime 40% of china's iron ore mines are standing idle as steel prices have crumbled. and loans to firms and households fell more than expected. ecb staying loans to the private sector fell 0.6% from the same month a year ago. italy's borrowing costs falling at a bond auction today. analysts say the auction shows nand for italian government paper remains healthy. and eu regulators are prepare to go charge microsoft for failing to comply with a 2009 ruling. that ruling had on ordered the company to offer user as choice of web browsers. apparently they may not have

done that. if guilty, microsoft could face fines of up to 10% of its global revenues. and that would be a lot of money. >> iran still, we're this close to nuclear -- think our unfunded labels are like 60 trillion or something. europe back in the crapper, but the refs. huh? >> i told you, i don't always like unions. i'm actually happy that the refs union won. >> it does provide a release from some of the travails and the worries of every day life. spoorts is sports is an escape. >> they said they will be back on the field tonight. >> i think the regular refs had a deal with the foot locker guy. >> did you see the story of the guy who actually made that call? he's a bank of america full-time

banker. so you're a banker, a fill-in ref. the only way you could probably be less popular is to run for congress. >> and even with the regular ref, we get plenty of replays. it's a hard -- it's hard work to be a decider. >> roger is the loser in this. >> we'll forget about it eventually. he was pretty much unblemished by anything up to that point. >> they hardly got anything. a couple hundred grand a team. it's irrelevant in all of this. >> if it gets down to the end of the season and green bay, if their record at that point, if it would have made a difference if they had one more win. >> you're quite the sports guy this morning. i think protest a little too much. >> i'm interested in the 401(k) plan of the refs.

>> you are very sportsy today. >> isn't something going on in spain? >> there is, and nothing to laugh about for sure. protests yesterday in both greece and spain. it's gotten nasty. let's get to spain and today's budget unveiling. steve sedgwick, we have sent him to madrid. it's quieter today, steve, yes? >> this is where all the action was, the neptune fountain where the last couple of nights, especially two nights ago, we saw such hated action with rubber bullets and you can see a little bit of the barricades behind me which are still in place. same people who organized the disputes over the last couple of days, they are potentially having another one on saturday. and so we'll keep coming back until we get what they want. but they're not necessarily going to get what they want because this rajoy government

are talking about cutting budgets across the board. ing a fridand the problem with n is not like greece that's the central government that created all the problems. actually it's the people themselves, the developers, the house owners and banks who basicry took on too much leverage and now the central government is being left to try to foot the bill. they're trying to get the deficit down to 4.5% deficit. quite frankly, that is pie in the skil according to pretty much all the analysts and the economists. and it's just a question of how much they'll miss by. because this economy is enacting extreme austerity, and this debate is relevant whether it's obama or romney. is austerity actually denting growth, is it creating more problems than it solves. let me give you one example. we have a sales tax in this country that has been raised

from 16% to 18% to 21%. that has created a slight inflation issue. now, pensions are inflation linked. and this country in november has to increase pension abouts by inflation. so by raising 2.5 billion euro v.a.t., it will cost them 3.5 billion euro misincreased pension costs. so you can see the conundrum. they're enacting enormous amounts of austerity, but that's denting an economy which is already in recession. its second since 2008. and things are getting worse. 25% unemployment, a million up sold homes. and we haven't even talked about the banking crisis and the autonomous region, some of which including catalonia are looking trying to get some form of assembly. it is a toxic mix. >> imagine that there will be pressure on markets as this they think unfolds.

we're also counting down to the wire here of course in the presidential election. and joining us on the set, bill richardson, former governor of new mexico. you're in town for the u.n. >> that's right. i was with a group of democrats and republicans yesterday at the u.n. expressing real concern over ahmadinejad. i was supporting the president's efforts on stopping nuclear weapons in iran. but gingrich and i and tom ridge, we were talking about the importance of boosting the iranian opposition. >> so i want to talk politics if you'd indulge me. you're talking about much more serious stuff in many way, but only one question and then everyone can have at it. i was trying to think what do i want to know from you. only one thing. if obama, your guy, as he likes to say my guy, but your guy -- >> yours, his. >> -- wins, what confidence do you have, if anything, that he will be able to bridge the gap,

that bipartisan gap any better than he has in this past four years recognizing that it appears that it has gotten worse and worse and maybe has made it worse? >> i'm an optimist. there's a glimmer of hope. as i go around the country, you are seeing republicans bragging about how they work well with democrats, democrats how they work well with republicans. >> this is an election. >> but my point is that i think you'll see the president unleashed, you'll see the president proposing comprehensive tax reform. i think he'll say that he's for the bowles-simpson plan to deal with the debt. i think you'll see -- >> so you think all of a sudden you'll have a compromiser, all of a sudden everyone will hold hands? >> i think the voters will send a message in the house and senate races that they want both parties to work together. >> what would that somebody. >> the message will be -- >> more democrats, more republicans? >> no, i think it's going to be

a very, very strong message that says we've had enough of you guys or we'll have a third party. i think you will see a fair number of incumbents thrown out. >> who ends up with the senate? >> i think democrats barely keep the senate. >> how about the house, it becomes less republican? >> yeah, i bet you democrats get ten new seats. but i think those elected will be reformers. this is a crucial time in history. i see the president getting -- it will still be close. i think romney will do well in the debates. challengers do well in the debates. >> hispanic vote. they come out? the young people? >> they'll come out again. now, george bush was elected president twice because he won the hispanic vote over 35%.

he got 40%. mitt romney's at about 20% to 25% right now. he's too far behind. and states are going massively for the president. >> what polls do you read that you actually think are right? if you looked at rasmussen, you'd think it's a jump ball race. >> i do think it will be very close. i think talking about three or four electoral votes, i think we're also talking about those eight states that are critical. the ohios, the colorados and nevadas, floridas. but img t think the president i moving forward. >> the latest polls actually show president obama has a big lead in states like ohio and florida. do you believe those polls? >> they move around, but i do think that he got a bump after the democratic convention.

no republican has been elected president without winning ohio. so i think that's -- mitt romney will have to rebound. and i see the debates where he's a good debater. he won 16 out of 20 republican debates by his own count, but i think he did well. >> i'm going to make this hard for you. if you were advising romney right now, what would you be telling him to do? >> i'd tell him that the debates are his last chance. >> so do you tap hard to the right, do you go down the middle? i would argue some of the things he's said over the past couple of days around taxes and raising them on the middle class -- not raising them, but suggesting that taxes will not go down suggest he's going more to the middle. is that the right or wrong answer? >> that's the right answer, but i think the perception of governor romney is he's already too encrusted in the right. the american people want a centrist pragmatic president. >> like the one we had the last four years. >> and what they want is

moderation. and he's trying to move to the center, but it's too late. he got too tied up in the primaries. >> do you think we've had a moderate pragmatic president the last four years? >> i do. he's pro-growth, pro economic growth, centrist foreign policy. i think you're foreign policy is good. >> when you look at politics, it does seem that both parties have wings that have broken off in different directions. you have the streextreme left a right and their voices have gotten louder. >> i'm a centrist democrat. i'd like to see the party probably move a little more to the center. but i think if there's not some real action after the election, you're going to see the emergence of a strong independent party. i'm not if for that.

but i think the voters are sending the message they want things worked out. >> but in terms of the fiscal cliff, what are we talking about? >> there not be panic right after the election when they deal with the debt agreement, the defense spending not be cut dramatically, that we deal with the bowles-simpson, the debt issue. i think you'll see some kind of compromise right after the election from both parties. i'm a minority opinion here. but i think the american people have a strange way of saying enough of this and we want some changes. and it's going to happen. >> i've been surprised that it hasn't been a bigger issue on both sides, the boobowles simpl approach. >> right now you the way you get ahead unfortunately is negative campaigning.

issues matter to some, but ear talking about a very narrow group of voters. minority, young voters in about four state, maybe it's 6%. you're targeting that electorate. and the way you you drive thumbs unfortunately is by being negative. >> bill richardson, thank you for coming in this morning. we'll see what happens. >> did you see the driver less cars? >> dennis miller tweeted -- i said can i use this. where does a driverless car need to do, why doesn't it just say parked? seriously. >> like a steven wright sort of -- >> it is. but where is it headed? i mean, is there some sort of --

and the other thing, why do you need a steering wheel? have you thought about these things? >> i'm worried about jeeves' job. >> my computer goes down and am i sitting there -- >> you're sitting there drifting off. >> no way. >> i'm excited for it. >> governor richardson, thank you very much for coming in. it's been great having you. the paris auto show opens to the media today, but the focus will be less about flashy new models and more about how to jump-start the european auto market. they're in their fifth year of decline. overcapacity is a huge concern. phil lebeau joins us with the daimler ceo with him. >> thank you, becky.

i know it's hard to hear us over there when you have different press conferences going on, so i appreciate your patience with us today. i'm curious, give us a take in terms of what you're seeing in europe. what's the latest description of things, if you will. >> certainly it's not developing very favorably. year to date it's down 10%. but mercedes is up 2% in the very same market. so gaining market share based on great new products and very strong brand. looking forward, of course it all depends on the further development of the debt crisis. i hope we have found the ground soon and we will see first signs of the recovery. >> do you think there's going to be a recovery? and i say that because the ceo of nissan renault at the show today said i think it will be bad in 2013. all the automakers are being

hit. and now there are reports out of germany that you're looking at cutting back production. where do you see the bottom as? >> fraulirst of all, we're up 5. production still higher than it was planned at the beginning of the year. we have some discussions of our union presentation and production is pretty normal. so, yes, the challenges are higher. but we address that with great new product and with further program of improving our efficiency. so we try to prepare if potentially more demanding times. but we are well prepared. >> are you worried about china? because it's slowing down, as well. everyone the luxury market seems to be cooling off a little bit.

>> it's growing but at a slower pace. and this might even slow down a little bit more. but i'm absolutely confident that this is a short term effect that china will continue in general on its strong growth path. and that means lots of more cars to be demanded and to be sold. even though we're going through a number of months of less momentum, i'm very positive that next year chi in will positively contribute to the overall car market. >> the last question has to do with a company that you hold a stake in and it's tesla here in the united states. they're coming out and saying that they're developing plans, they'll have to slow things down, not going as quickly as originally thought. any concerns about the demand in the future for the electric car given your investment in tesla? >> i think the oem is never in a

hype mode as some of the media was as far as electric cars are concerned. this transition will happen. it's a long transition. we're very very beginning. we'll see customers, but of course so far it's a niche and will take time to develop. we will continue to pioneer this market and in 10 or 20 year, electric cars will play a significant role. >> doctor, thank you for joining us live from the paris auto show. joe, becky, andrew, it does not lk like there's a bottom. we're hearing from ceos and they are not seeing a bottom yet. are you looking out at 2015, 2016 before the auto industry can say, okay, at least we see a base here. >> bad news add to go a pile of

bad news we've heard recently. phil, thank you very much. and we do want to have you back here soon to talk to us more about the driverless cars because we can't get enough of this stuff. >> you bet. when we return on squawk, we will get to today's business traveler's forecast plus we have sports news you need to hear it before you head on the office. [ male announcer ] you are a business pro. governor of getting it done. you know how to dance... with a deadline. and you...rent from national.

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welcome back. in sports news, the nfl reaching an agreement to end the labor dispute with its regular game officials. the deal expected to allow locked out refs to return to action for this week's game. man, that was -- >> back thursday night. >> weird, isn't it? >> after the huge -- >> i know, but what if that play

hadn't happened. that could have -- >> could have dragged out for another couple weeks. >> the throw, the trajectory, a lot of things in life happen -- >> and the refs got a lot of -- >> that's why you really can't go back and chang the slightest thing. you can't even comb your hair differently. the entire world -- we'd be different countries based on how you comb your hair. different border. >> the butterfly's wings. >> did you just make that up? >> i did. >> amazing. in baseball new, as setting an american league record for striking out the most in a season. 1326 times so far this season. that's one more than the tampa bay rays had back in 2007. still the as beat the rangers 9-3. pulls the as to within three

games of texas. october classic, so i was trying to figure out, should be starting -- i think we have about five or six more to go, i think. is that right? >> i don't know. i didn't add it up. >> you know who would know. right here. mr. sports. >> mr. sports. i have no idea what the answer is. >> let's get to today's national weather forecast. alex wallace joins us from the weather channel. good morning, alex. >> good morning. and this morning tracking some showers. we're he seeing that here across sections of the northeast. new york city seeing light activity, but right around philadelphia, heavier rain. we trail that all the way back through the ohio valley into sections of the mid mississippi valley, as well, more storms into western sections of kentucky, heavy down pours there, and then more scattered activity back across the southern plains. so active morning for some spots. we'll keep that going right along the front across the middle of the country. "squawk box" back in a moment. bob...

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welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. larry summers will join fuus in minute. first, how do you test drive a driverless car? >> mike jackson, ceo -- >> you test sit. >> you sit with your hands like this waiting to grab the wheel. >> that doesn't sound very

relaxing. every time you'res passing a truck, oh, this is it, this is the one. >> it has the spinning thing on the top of it. >> have you said happy birthday yet? >> no, i was going to do it at the end of the show. >> i said this, do you know how andrew rolls? i think you have kevin clash coming over to your house on the kitchen island, have elmo -- >> the boys love elmo. >> let's do it right now. a very happy birthday to henry and max sorkin this morning, they turn 2 today. >> and elmo will be a surprise. >> had a little birthday party with a twist of cookie monster. >> when you're sorkin, you get the real elmo, don't you? >> if kevin is watching, if you would come over, but that's not -- >> do both of the boys like elmo? >> both are infatuated with elmo. cookie monday ster is in there,. but it's an elmo house. >> he's such a nice little boy or nice little thing.

i don't -- >> he's a little monster. >> like all 2-year-olds. >> let's talk about some of the headlines. anti-government protesters gathering near parliament in madrid again. spain will be unveiling its budget today, the country's prime minister trying to enact further cut backs part of an effort to bring down one of the euro eurozone's largest public deficits. bli supposed to include limitations on early retirement and eliminating some tax exemptions 37. >> let's get a check on the markets. futures after what was another down day. five days in a row down for the s&p 500. futures are quite a bit higher. dow up by about 72, s&p up by close to half a percent, nasdaq higher, as well. in europe, with these riots and these pictures picking up again, you still see green arrows here, although those pictures which

been what have changed the market's mood. so we'll see how it holds in. ftse 100 up by 20, cac 22, and the dax up by 32. in asia overnight, you did see some positive arrows. the shanghai composite was up by 2.6%. this is ahead of the market's holiday for many of these markets next week. they'll be closed for much of the week and did you see positive action ahead of time because there's an expectation that china could get involved in trying to do something to stimulate the economy over the holiday week. that's part of what was pushing things higher especially in china. oil prices dipped below $90 for the first time since the beginning of august. this morning $90.29. but the pressure on energy has come as a big surprise and it has been fairly relentless. also the ten year note if you take a look this morning, you'll see the yield at 1.64%.

the dollar is a mixed picture. it is stronger against the euro, though. down against the yen. euro trading at 1.2056. and gold prices very quickly you'll see they're bupup about $4.10. >> even google, a birthday cake comes up. >> what? >> did you see this? >> you, there it is. >> this comes up as a birthday cake because it's google's 14th birthday. but they can always go to google on their birthday and think that it's all about them. >> that's great. >> can you see the future, though, as we were all sitting in cars all going the same mf-no we're all going the same speed, you look -- everybody's in the same formation. and at lunch they sefsht michelle obama lunch, you get like one asparagus and one sprout, no big gulps.

15.9 ounces of a coke. that is our future. i just saw it. and i don't like it. >> phil is defending it, he said you can take control at anytime, but you don't have to just sit in the car, you can -- >> did you ask him why does a driverless car need to go anywhere? >> i didn't ask that. >> comments or questions, e-mail us. squawk@cnbc.c squawk@cnbc.com. it's like brave new world. i don't like it. coming up, morgan stanley's adam parker, nowhere in his notes does it say how negative he's been. we'll check on his call on markets. last time he was with us. and then larry summers, no shortage of topics to discuss. europe, the u.s. economy, taxes, spending, the fiscal cliff, the dollar. he'll join us live. we're sitting on a bunch of shale gas.

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third quarter draw to go a close. joining us adam parker, equity strategy yis. we had kashkari on yesterday and when he comes on and the market's weak, i say you knew

this. and then when it moves a lot ands's gone the other way, you really -- that was a missed call. we can do the same with you. depends on what day. you have been worried about a lot of things with the market. europe, all these headwinds. but just talking off camera, if the fed is going to give a 40 billion a month again in an economy that doesn't seem that bad, all bets are off. how do you try to gauge where the stock market is going? >> once i became master of of the market on cnbc, everything i said started to be incorrect. before that, i was perfectly wine. >> if you wait long enough, you might be correct. are there fundamental underpinnings or is it based on -- is this anything more than a dislocation? >> i don't see this too often. that's a great question. >> you know what -- >> let's go to commercial now. >> if i want to, we will. thanks more began stagan

>> if i want to, we will. thanks more began staga stanley >> in honesty, it's been more about policy and positioning. if you look at most of the economic data outside of housing, manufacturing data, job, industrial production, they've been softer. and a number of big bellwether companies that have been down the last few weeks. transportation and tech. so the earnings estimates have come back. we thought earnings would be disappointing and the two things that seem to matter for the multiple you pay are low growth, a 0% earnings growth in the s&p second quarter, analysts think it will be down 2% in the third. and extreme rates. we had the most extreme ten year ever during the quarter. >> is the fed messing up the markets? >> yeah, i think what you're doing is you're creating so far $1.7 trillion on a computer to buy your own securities to try to push people off the risk curve and that will have long term negative ramifications unless they can get just -- it's

a matter of timing, exactly. we've been wrong with the timing. >> did you see some of the stuff written by left wing bloggers? did you ever think it would be a target of hate mail from the progressive wing? >> i didn't see that. this is the first i've heard of that. >> remember you wrote that the market was up because it was -- the only reason you could see was that it was anticipating a romney win. >> what we thought was that investor sentiment was such that at least earlier in the year that the the multiple might contract if obama won. so we weren't making a political call. i'll let you guys -- >> now it's gk oing up because it's anticipating an obama win this. >> i've been surprised about that, that maybe the multiple isn't impacted by the presidential election. i guess we have the debate next week. but i think it's been more about fed policy. >> there are those that say that the market hates uncertainty.

and that we know what we got the past four years and even though everyone -- maybe certain players don't like the way it has been treated, but the market's done pretty well. so at least it knows what it's getting if obama is reelected. >> nobody seems to be worried about anything in the near term. but the earnings -- fundamentals matter and i believe they will again. i think the earnings -- >> you're arguing you'll be right eventually. >> i hope so. >> is that a good question? >> what keeps me up at night is if the earnings reflect being up and i miss it. that's what i want to get right. >> you look at the late '90s, things trading 40 and 50 times earnings p. >> because the belief of growth was much better. i don't see how with the big fiscal cliff, the base case of a

recession in europe, the diesel crating gdp in every major emerging market, how -- >> if you take the cliff out of the equation, what happens? >> i think you could take a chunk of it out. >> a decent chance that it does come out. >> i think a big chunk of it will and i think people believe that. i think that's in the price. but i don't know if it all will be. it really depends on -- >> your gamble is that they kick the can and that you're dealing with this in, what, middle of 2013? >> could be later. our call is earnings will be $99 for the s&p next year. street is at $116. so typically as it declines, you get more afraid about the trajectory. a year ago july to september, we were getting tons of questions about what if it's a recession line '91 or '01, could it it be $80 in earnings. this time we got zero.

so the risk is they're too complacent about that. >> you stuck to your guns on everything else with the market. but you could are hahave said d is up. what if the market knows? or jimmy carter going up by eight points and then reagan had a human win. you're waffling on that? >> well, what we try to do is figure out which -- most try to figure out which sectors will do better. this has been almost all about multiple expansion. so i think at some point you argue, geez, they can't keep doing this. so it kind of feels like, yeah, i've been wrong about that, but you can't do 100 qes. is the balance sheet going to be $6 trillion, $7 trillion in. >> never going to stop. >> everybody was argue against

qe-3 and that things would have to get much worse and things didn't. they just stayed the same. and they still decided to do it. >> earlier in the year i thought the economy would have to deteareris rate and the market would go down before we got it. so the fed put was at a higher price than i thought. >> helicopter ben, that was always the name. he's a student of the depression and he wants to make sure we don't get in a deflationary spiral. >> we did see analysis last week looking at the week to week change in the fed balance sheet and the s&p change. and it's correlated. when they create money on computer, it's good for the market, but what they've announced should be kind of a 22 233% to 4% tail end. is this enough. probably not. so they'll do more.33% to 4% ta. is this enough. probably not. so they'll do more.to 4% tail e. is this enough. probably not. so they'll do more. and then if you go down your logical path, then perhaps you have yellen or somebody who is more dovish coming in.

so it could be raining cash at in a point. so you have to argue is that always going to work. will it help the real economy, will it help jobs, or will it ultimately make people worried about the deficit/debt. we're in that latter camp. we think ultimately you're not going to pay a lot knowing they're propped up by unsustainable trends. >> adam, thank you. >> good to see you guys. >> i hope it's not like the sports illustrated cover page. >> it is. >> trying to give it back. adam, thank you. when we return, former treasury secretary larry summers, we'll talk about the economy, the dollar and keeping uncle sam from driving off the fiscal cliff. #. tomorrow two hours with the journalist who helped bring down enron, big banks, market

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welcome back, everybody. today the center for strategic and international studies is holding a bipartisan event. joining success one of the many people who is going to be there today. former treasury secretary larry summers. mr. secretary, it is a pleasure to have you here today.

thank you very much for joining us. there are so many things we'd love to ask you about but having you here as a former treasury secretary, someone we respect so much on their opinions on these things, we've been watching the dollar recently and it's always been the united states policy to have a strong dollar policy, but when you watch what the central reserve has been doing, how much do you think it's damaging the dollar? >> i think that as we always said when i was at the treasury, the right thing to do is to focus on the fundamentals of the economy, and if you get the fundamentals right over time, exchange rates will fluctuate, but they will be all right as well so i think the federal reserve is right to be making judgments in the context of the overall economy, and i think they're right to have a concern about the slowing of the economy and a focus on strengthening the economy. as to the specific measures that they undertake, old habits die

hard and respecting the independence of the federal reserve, you're not going to get me to make a comment, evaluating those measures one way or the other, but i think that the judgment that monetary policy should be oriented to domestic economic strength is the right basic approach for monetary policy to take. >> does it surprise you to see the euro at $1.28 to $1.30, because that surprises me. >> i've long ago given up being surprised by currency values. the only forecast you can make is the famous jpmorgan forecast that they will fluctuate. >> i know that you are going to be looking at tax reform and the idea of whether or not we can cut marginal rates because this has been so discussed in this

election cycle. mitt romney has laid out a plan to bring down marginal rates and try and get rid of a lot of the deductions. does that work in your opinion? >> look, i think we always want marginal rates as low as we can have them. we want to have a broader tax base. there's much too much in the tax code that got put there by various special interests, so i think you'll find bipartisan consensus on keeping marginal rates as low as you can and on broadening the base. where i think the art part comes in is that it has to be our central priority looking to the future to raise more revenue than we're now raising from the tax code. we're now raising less revenue from the tax code than any time in the last 50 years. we've got an aging population, no matter how we control them, health care costs are going to rise, our debt burden is, has increased and interest rates

won't always be zero. so we've got to do whatever we're going to do with taxes in a way that's consistent with the country's finances staying stable and i think the aspiration to avoid ever seeing the top tax rate go up that governor romney has proposed is just not realistic at all. there's a debate, there's a precise debate among the analysts, but no analyst, no analyst on either side has made a credible suggestion that you can keep the top rate down even if you were prepared to eliminate all the deductions and expenditures without raising taxes on people with an income below $250,000, and i think, given the tremendous changes that have taken place, i'm not for class warfare, i'm not for

any new program of redistribution, but i am for recognizing that when there's a group in the population that has seen its incomes go up the most and has seen its taxes go down the most that if you're looking for increased revenue that's a place you got to start. >> you can't get it all there. sooner or later you might have to borrow the base. i was wondering you and marty feldstein, you're both the smartest guys in the room. what happens when you're in the same room? he has argued you can do it. you saw that piece he wrote in "the journal." >> of course i did. >> you were -- go ahead. >> marty was my teacher. i've got immense respect and marty's was a clear analysis that demonstrated, and this is just the way he put it, that if you defined high income as above $100,000, you could do it by eliminating deductions for

people with incomes over $100,000. now, me, i don't think that a teacher and a policeman married to each other constitute a high income family. >> even $200,000 doesn't, or $250,000 does either. >> that might not, i don't disagree with where you're going. so marty's analysis was right within its framework of definition, which was that high income was $100,000 and above, that's not the framework i would share, and i think that's not the framework that most of the political process shares. so i think that before you start taking away the charitable deduction from a family with $120,000 income, i'd rather see the top tax rate go back to where it was when president clinton was president. you know, there were plenty of people in 1993 who said that the

39% tax rate was going to wreck the economy. in fact, we had the best boom with the best benefits across the economic spectrum that the country's ever had, and that was a period when we made a lot of millionaires, we made a lot of deca millionaires, the stock market did fantastically well. i think it's a real irony, and this i would hope your listeners would keep in mind that the periods when many of those in business and concerned about income complain the most are the periods when they actually do the best. if you look at the strongest presidential terms for the market, it's the obama period, and it's the clinton period, and that's when the complaining was loudest. >> i know you have a plane you have to catch.

we are sorry because we'd love to have you back again soon. please join us again soon. >> thank you. >> at the top of the hour we'll continue our discussion.

good morning, everyone. welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin, and here's your thursday morning line-up, we'll be talking about fiscal challenges and the future of america with guest host and former in the sam nunn and marty feldstein will be joining us at 7:30 eastern, david cote, honeywell chairman and ceo will talk to us about tax policy and

8:00 a.m. senator rob portman on voter turnout in the buckeye state and tom stemberg will joining us and 8:40 what's brewing at sam adams with jim koch, co-founder and chairman. first andrew with today's headlines. >> let's look at the futures at this hour, we'll look at that screen over there, you can see green arrows across the board, dow would open up almost 80 points higher, and the s&p 500 will be up as well. it is a busy morning. it's the busiest day of the week for economic reports. we're going to get fresh data on jobless claims, durable good orders and gdp coming at 8:30 a.m. eastern time and we'll get august pending home sales at 10:00 a.m. eastern. microsoft could be in hot water with the european. eu is considering whether to declare the software giant in breach of a 2009 agreement which it ordered to give consumers a

choice of internet browsers. microsoft could face fines as much as 10% of sales if it's found guilty. sears and darden restaurants are planning to change the ways they give health care benefits if their workers. the "wall street journal" say they plan to give the employees a lump sum and choose their coverage and insurer from an job line marketplace. the change is designed to give employees more choice in the kind of coverage they want and a deal we got just crossing the wires, tempur-pedic is acquiring sealy for $2.20 per share. i think i have a sealy bed. tempur-pedic has that foam mattress. >> you leave the wine on it and do whatever you want. >> bowling ball on the other side. >> leave your wine there. spain is going to announce a series of economic reforms in a tight 2013 budget aiming to avoid an international bailout.

cnbc's steve sedgwick joins us from madrid. you can only say hello to me. that's it. >> reporter: hello, joe. is that it? i can carry on. i'll carry on anyway. we have a bind for the government. you've got a recession already, you've got 25% unemployment, you've got a housing crisis which means prices have fallen at least 25% and could fall again. the remedy for the markets is to have more austerity. it's what they have to do to gain the confidence of the markets, to gain the confidence of northern european markets and paymasters, i.e., the germans so they can get the bailout if and when they ask for it on a sovereignty basis. they're trying to preempt conditionality by having extreme austerity. we're talking about possibly getting cuts as much as 30% in agriculture, public works and infrastructure. across the board, and there are real concerns that far from being the remedy this could

entrench the recession and make it harder for this country to pull itself out of the mire because there are a lot of things that government doesn't control. it doesn't control the regional budgets of places such as a andalucia and catalonia and the other. of course we had a banking sector crisis and we'll get information about just how much the banks need. it's crisis time here in spain and we'll found out what rahoi will be doing in a couple of hours. meanwhile we're tackling issues facing congress from tax reform to the fiscal cliff, a special forum is hosted by the center for strategic and international studies. joining us on set former georgia senator sam nunn, one of the event's organizers and chairman at csis and martinfeld stein, former council of economic

advisers chairman and economics professor at harvard university. he's also participating in the csis event, and great to see you, senator, thank you for joining us. i got to start with d dr.feldstein. you've kind of already been here in spirit, talking to secretary summers, what i got from him, i mentioned your piece in the "journal" doctor, about maybe if you got rid of the deductions you could make it work, make it a revenue positive revenue enhancer if you were to lower marginal rates and get rid of deductions, the secretary's response you'd have to go down to $100,000 for where you'd raise taxes and he kind of didn't want to agree to something like that. it has to be above 250 but above 250 there's not enough money to do it. i don't see how it works.

>> what i was talking about in that piece in the "wall street journal" was not the plan that i or anybody else is specifically proposing, but i was answering a study, i claim that it was impossible mathematically impossible for governor romney to do the things that he had said, cutting rates and broadening the base, and basically i said, no, that wasn't impossible, if you got rid of all the deductions for people with income above $100,000. nobody's proposing to do that. i just wanted to show that the accusation that somehow the romney campaign had been not telling the truth, that that accusation was false. but i think the basic idea of broadening the tax base is something really should guide where we go, going forward.

>> the treasury secretary went again to let egg the bush tax cuts expire on those at 250 and above and mentioned the good times in the clinton years, et cetera, but out of the trillion-dollar deficit that we're running, what would that do if all we did was go back to 39.6 on 250 and above? i don't get it. i don't get it. >> very little. the real key to dealing with this problem is dealing with the so-called tax expenditures, all those special kinds of really government spending that's built into the tax code, if i buy a hybrid car or a solar panel, the government doesn't write me a check but it allows me to get a tax deduction, if i get a bigger mortgage, same thing, they don't send me a check, but they reduce my tax bill, so that's really government spending built into the tax code, and that's what congress is going to have to

limit if we want to raise revenue and reduce top tax rates. >> senator nunn, what's the answer? i know you've got some ideas. >> i think we have to start with the problem and the problem is we basically do not have simple arithmetic and common sense applied to america's fiscal challenge. the fiscal challenge is on the spending side. we've got to deal with the health care cost increase, and you multiply the cost increases by the huge demographic changes with older people retiring, and you get a first class line going straight up on health care and entitlement so that's the fundamental problem. the second part of that is, can we do it all on the spending side in terms of getting our fiscal house in order and the answer to that in my view is no, we have to have some revenue to augment that. we're not going to cure this problem with revenue but revenue has to be a part of it and then you get to the third challenge and that is how do you increase the revenue in the same package

in my view where you basically get the trajectory down on entitlement programs but increase the revenue that doesn't damage the economy or does the least damage possible and that means a growth oriented tax package and that's why the tax expenditure side to me is the place you ought to start, whether you can finish there or not is another question. >> unfortunately we always have to worry about revenues here and seems like we just started but we have to take a break, is that okay, andrew? >> fine by me. >> a little revenue, not going to raise a lot. we didn't sign a grover norquist advertising. >> a couple minutes worth of revenue and we'll continue the conversation with former senator sam nunn and harvard professor of economics martyfeld stein. at 7:30, david cote, honeywell chairman and ceo he'll join the conversation. and the president and mitt romney hitting ohio.

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we're back this morning continuing our conversation with former u.s. senator sam nunn and martyfeld stein. senator, let me go to you. becky had the best question during the break, you suggest you have to get all this done together, meaning collectively,

a grand bargain, a grand pack annu age. do you have any confidence in the world it could happen? >> i think it came close to happening last year so the answer is yes, i think it can happen. there are an awful lot of smart folks in the congress. they do not have the support. the ones trying to make it happen do not have the support from their leadership in either party and don't have support from their party base so we are polarized. we're not stupid. the people in the congress know what needs to be done and there's a growing group of them that are working together. you got the gang of six in the senate, you've got a couple of people now talking about in the senate doing what i think needs to be done which is to get rid of this disastrous cliff we've got january 1st where we fall off of it and have a very, very hard landing. nobody knows how hard, substitute something like simpson-bowles, dominici-rivlin and give us something that you

can live with in june of next year if they don't get together. >> that's a great idea, instead of kick the can down the road, you kick it down the road but here's a real solution this will kick in. >> substitute the can, change cans and kick whatever is there. >> what's your worry that unto itself creates a whole new cliff of uncertainty? >> it may be uncertainty but it's uncertainty as to whether we'll have a medium landing or a soft landing, not an uncertainty whether we'll have a catastrophe. i'd rather swap a soft landing for ka catastrophe any day. >> marty feldstein, if you hear something like that, wait six months before something like simpson-bowles, one of the other plans out there, before that gets swapped in, what does that do to the economy? >> i think that would be a very good thing to do, i agree with the senator. i think that if between the election and january 1, the

congress could agree that if there isn't a new plan put in place six months later, something like simpson-bowles would automatically take effect, that would be a big boost for confidence and for the economy. and you know, all the talk about whether we need revenue or it can be done on the spending side really misses the point that so much of our spending, so much of what is really government spending happens in the tax code, happens through the so-called tax expenditures, so getting rid of those, while it produces revenue, really is a cut in spending, whether it's spending to subsidize mortgages or to subsidize solar panels, it's spending, and congress ought to be able to agree that it's not a debate about revenue versus spending, if they can go after those special tax breaks. >> makes a lot of sense but

senator, you know very well politically it's hard to grasp something like the mortgage deduction, which is so popular. how would you go about doing something like that in. >> i'd combine the martyfeld stein/harry summers approach. i'd go with marty trying to get all of the tax expenditures the political system will stand, maybe through credits instead of deductions and to the extent we can't do it the martyfeld stein way politically, you may have to tick up rates what somewhat at the very top as larry said but i'd give the feldstein approach. or go to a credit so you don't have a deduction for the high income people and might want to do that in other areas. >> what would be your number on the deduction, half a million dollars? >> i'm not being that precise. >> nobody wants to be precise. we need, that's the problem, right? >> you just said the democrats will not go for the 28% marginal

rates in simpson-bowles, the higher income earners will have to be higher than that. they just won't do it. the 28 would kill them. they will not go for it. >> if you want to talk about the long-term and i think now we have to try the approach we're talking about, broaden the base, get the rates as low as we possibly can, it may be slightly upward or slightly down but it's not going to change dramatically. >> larry said he didn't want taxes going up on people that made $100,000 and above, there you're too much into the middle class to raise taxes. you're broadening the base, the democrats talk about it, how do you broaden the base if you don't raise taxes on search in. >> joe, i'd love to do nothing but raise taxes on the very wealthy, it appeals to me. the problem is there are not enough rich people. you got to go down on the deductions. you got to look at the other side and i think both parties

are wrong here. i don't think that common sense and arithmetic is being applied by either party and you look at the romney plan, you got, he wants to increase defense, right. >> what do you think of that? you're an expert on that. >> well, i don't think you can do it in this environment. i'd like to see us do whatever we're going to do -- >> the world's gotten a lot more dang ruerous in the last month. >> it is but we're coming out two of wars thate expen expensive, so i think you have to play with the whole deck of cards. in the long run we ought to change our tax system dramatically. i don't think we can do that in the short run. in the long run i'd love to see us go to encouraging savings and investment, some type of consumption tax at the income tax level. >> is anyone going into politics with a full deck of cards? >> well, increasingly no. >> marty, i want to just speak to one issue which is globalization in the whole tax debate during the commercial break, joe and i were talking

about revenues, percentage of gdp and given the economic uncertainty and the economic headwinds we've had over the past three or four years but how much, when you think about the little revenue that we're bringing or a lot less revenue we're bringing in, how much of that is a function of just straight up the economy and how much of that is globalization? >> oh, it's not globalization. the reason why revenue is down is that the economy is weak and therefore profits are down, and incomes are down. but let me come back to the issue of how do you put limits on tax expenditures? i don't think we should substitute credits. i don't think we should eliminate any of the tax expenditures, but i think we should put an overall cap on the total amount of benefit that each taxpayer can get from using all of these tax expenditures. >> that's a great idea, too. >> so that way you can politically say to people, you

can keep your mortgage deduction. you can keep your deduction for state and local taxes, you can keep your employer exclusion for health benefits but when you add it all up, the total tax saving that results has to be reasonable, can't be too large as a share of your total gross income. >> very quick question, marty, how big is the number, if you add up all of these deductions and things that are built into the tax code? >> well, the total number that bowles-simpson talks about is close to $1 trillion, but if you ask what would be a reasonable thing that protects things like iras and 401(k)s, which are good for growth, but also at the same time puts a cap, a cap of say 2% of adjusted gross income on the amount that each individual can benefit from this, that would raise nearly $. 00 billion a year. >> marty, stay where you are. senator nunn, stay with us as well. we'll be back in just a moment,

after this break. coming up, a deal on the field and the oakland a's set a record. hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business. for the spender who needs a little help saving. for adding "& sons." for the dreamer, planning an early escape. for the mother of the bride. for whoever you are, for whatever you're trying to achieve, pnc has technology, guidance, and over 150 years of experience

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to a new eight-year collective bargaining agreement. officials will be back on the field starting with the game tonight between the cleveland browns and the baltimore ravens. the agreement still needs to be ratified by the membership with voting set for friday and saturday but boy did they get this together quickly after that call from monday. meantime the nfl fined new england patriots coach $50,000 for grabbing the arm of a replacement official at the end of the game against the ravens last week and kyle shanahan was fined $25,000 for abuse of officials in washington's loss to cincinnati. no doubt the oakland a's will not be bragging about this record. chris carter's strikeout in the second inning last night at texas broke the single season american league team record for striking out, the strikeout was for 1,325th of the season for the aest, one more than tampa bay's rays had back in 2007, the team has seven games left to add to its total a. >> comments, questions about anything you see here around the

set on "squawk" shoot us an e-mail, squawk@cnbc.com, follow us on twitter, @squawkcnbc is the handle. come up, honeywell's ceo is in the house, david cote will sound off in an interview you can't afford to miss. check out the line-up for the rest of the show at the top of the hour, ohio senator rob portman will talk about the election in his key battleground state and 8:15, lululemon ceo christine day joins us and at 8:40, jim koch.

welcome back to "squawk box" this morning. two of the country's biggest mattress makers slept on it and now decided to join forces. tempur-pede sick buying sealy for $2.20 per share in cash, about $229 million, excluding assumed debt, plans to operate sealy independently after that purchase. spain is set to announce new budget reforms, spending cuts and new taxes, the country trying to reduce one of the eurozone's biggest deficits. details will be released later

this morning. and new figures from pew research show student loan debt held by a record of number of u.s. households, nearly one in five, 22.4 million households about 19% of the total had college debt in 2010, you're covered by the survey, it's up 15% from 2007. becky? >> andrew, thank you very much. we continue with our fiscal summit with a look at the four possible scenarios for dealing with the fiscal cliff. joining us on set for that and more is david cote, chairman and ceo of honey well, of course our guest host this hour is former u.s. senator sam nunn and david thanks so much for coming in. you have been talking about how important it is for us to get a hold of our budget issues, behave better, you've been a long time proponent of simpson-bowles. we just heard an idea from sam nunn, he said maybe what they can do is kick the can down the road six months but substitute in a simpson-bowles or a rivl -

rivlin-domenici plan. >> i like that idea. as we approach this fiscal cliff which is real and i've said many times a potential disaster or a potential opportunity, and if playing with the debt ceiling the way they did was playing with fire, this is playing with nitroglycerin. they need to understand that and there's a series of outcomes, one let the fiscal cliff happy i truly believe is a disaster and create a recession worse than what the cbo predicts. i'm not an economist but when i see how things feel out there it's not good. second alternative kick the can down the road so the cliff doesn't happen but the uncertainty lingers because you have no idea what's going to happen. the best outcome would be they actually solve it in this lame duck session but i agree with sam that's impossible. they can't do that. you say what's in between where i can get enough market certainty that i can feel

comfortable that these guys are actually being responsible with the country's finances, and to me that's where that alternative plays. i like it a lot because it gives you the time you need to think but it creates something that's real that people start focusing on and i think sam's point during the break was point, people start focusing on that and it causes different mental dynamics. >> sam your point this is something politicians could vote for t works for them, it provides cover. >> well you need cover for a lot of folks and they can say look, i hate simpson-bowles, i don't like domenici-rivlin but look at the abomination we've got coming. it's a substitute for something you may not like in preference to something you hate. that could be expressed to all of the constituents.

>> in terms of uncertainty your business, when you go is have board meetings, does this come into play in terms of your conversations? >> i would say it's not just a board meeting. it's how we're running the company now. when we look at democracies around the world are in gridlock now. japan, india, europe, the u.s., they're all in gridlock, nothing is happening. when you see something like this occurring where there's this big issue confronting everybody and nobody is doing everything, you don't see any progress, you find yourself saying you know i'm going to hold back a bit. there's no sense hiring right now. let attrition work for you. there's no sense investing right now. wait and see what's going to happen. it causes everything to slow down. you're feeling it, it's happening. businesses saying let's hold back. 100 of the top ceos around the country, everyone feels the same way, wait to see what is going

to happen. >> is there a situation where you have some demand in your business, and you say to yourself i'm still not going to hire. >> yes. >> there is? >> yes. at the end of the day -- >> wrong answer. >> it's not the wrong answer. we've had people come on the set that say as long as there's demand, we'll go do it. and other people come and said the opposite. >> so many ceos say that. >> demand makes a difference but you look at where you think demand is going. geez my orders rate last year was up 6%, now it's up 2%. demand is still there but am i going to hire in that face of a curve, no, i'm going to hold back. >> 55% of small business owners said they wouldn't hire given health care or regulation, 55%. they can't all be lying, even if you cut it in half. >> i'm not suggesting they are. barry diller on tuesday said he didn't feel this sense of

uncertainty in terms of how he's managing his business. >> david, are those real numbers the 6% and the 2%? >> no, but i would say here is one of the things that i've observed about short cycle orders right now and i think it's true for most companies. if you're in a place like europe, it's been negative all year and stayed negative. if you're in a place like the u.s., you started off the year with a more positive percentage and that percent of improvement has slowly declined during the course of the year. i think that's true for just about everybody. it's why we're all being cautious. okay, if i can just keep drawing those lines it doesn't get you to the right spot so i'm going to be careful. i'm going to wait to see what washington does until they sort this out. >> what could washington do that would mess you up or make you think this is great, i should have g ahead with some of the plans. >> if they pick one of the first two alternatives where they either say and you do hear this from some folks, just let it happen and that will give the impetus to make something work here, or if they just say eh, with he need six more months, we

have nothing to replace it with, those are both bad, the one that would cause you to say gee, let's think about investing now would be the third or fourth alternative and the fourth i just don't think is practical, the third one sam outlined i believe is the right one. if you take a look at the amount of money on the side lines now whether it's what companies have or what investors have, there's a lot of potential money to invest, it's just everybody's scared right now. >> david, what is your effective tax rate? >> 26.5%. >> 26.5%. >> that's up there. >> that's up there. what would it have to get to you really move the needle for you? >> well, half a point makes a difference, so i've never thought about it that way. i'm not sure what the -- it feels like there's another question behind that, that you and joe are going to attack on as soon as we leave. >> no, i'm just going to say, objection, you're leading the witness.

that's all i'd ever say. i could just have that, objection, you're leadings witness. i problem i see and it's a great idea but when you get simpson-bowles and you're going to do it for six months how do you get to agreement on entitlement reform, how do you get 3-1 if it's 1% replacing cuts with taxes? both sides are so entrenched. >> simpson-bowles has a limitation on entitlement growth, 1% above the growth of gdp. you could make that enforceable to the committees, not the details, but you can make the target or 1.5%. >> how about the republicans, 3-1. >> you have to break it out. >> the norquist guys that can't vote for that. >> at some point people just have to have the courage to say

grover's pledge is outmoded. we have to save the country. you have to put the country before your political party, you got to put the country before your political base. >> and we're going to have arguments on entitlements and the taxes and arguments on the 28% marginal rate, they'll lower it to 28% in simpson-bowles. where did it go on domenici and rivlin, down 26% or something, you're going to get democrats to agree to that? >> democrats would love to tackle the tax expenditures if they could get a big package, where the democrats have problems is on the entitlement side and there it has to be entitlement approach in the same package. >> i don't know historically what the lowest marginal rate top bracket we've ever had was, do you know? there's no way it was anywhere near 28% and they're already talking about the eisenhower years, we did 90, they're already talking about historically this is way too low. i don't see any of the things simpson-bowles ever being pal e

palatable to both sides. >> they're moving sides. if you're missing the rate you miss the tax expenditure pieces. >> the grand bargain, everybody has to get something they want. >> just because they talk about it that way doesn't mean we should. >> david you said your biggest concern with this idea would be that this is just another thing, another can that gets kicked down the road in six months. how do we make them sick to this one if they're not going to stick to the last one if the last one was ultimate stick to this or you're going to fall off the cliff. >> i remember the simpson-bowles commission and tried to make myself conversant with the numbers because i didn't want to be mucky the dunce, the only guy who didn't know what was going on at the table, in general i was able to follow the dialogue and one day everybody for 45 minutes spent their time talking about caps, triggers and a bunch of other words i didn't understand and i go the to the end and i said i don't understand this but sounds like you're trying to protect

yourself against yourselves and the answer was yes, that is exactly right because you can't incumber a future congress, so they can do anything they want when the time comes. >> wait a second, you can have this deal before january, january comes it's a whole new congress and they can say, eh, never mind. >> right, they always have that right. that's why i say there's a bit of risk to it but you look at this in terms of probability, if you've taken 80% of the risk off the table, that puts you in a better place than if you have 100% of the risk on the table. >> you have to have more public understanding, there's no question there has to be an education here. one side is saying two plus two is six and the other is saying two plus two is eight and they're both wrong, none of it adds up. >> sam you made a good point congress and all elected officials have to put their

country first. you signed something for grover norquist and also made a pledge to your country. >> you basically pledge to defend the constitution and the country. is grover's pledge more important than that? i don't think so. >> the same is true on both left and right. >> exactly. >> because when you recommend something like that you raise the retirement age by a year, 75 years from now, when my grandchildren will already be retired, and the outcry begins, this is ridiculous, and i've often felt everybody ought to take a pledge to take no pledges, that would be the best place. >> i describe that and the entitlement point save makes is right. when we pass social security and medicare the life expectancy was somewhere in the mid-60s. today the life expectancy is between 78 and 82, somewhere in that range and we basically haven't made the adjustments. now, you can't live with that. it was at a commitment, maybe

implied, 20, 30, 40 years ago. we've got to take care of the future. it's a moral obligation to our children. we're not going to leave our children in a situation they can live with and most people from a moral point of view will go for a deal that can truly protect the children and grandchildren. people love this country. they're not giving up on it. >> that argument hasn't been made, getting back to your point on two plus two adds to either six or eight that argument about this is important for the country, here's why, take a look at this in total, everybody has to give its taxes, its entitlements, its discretionary spending, we need to do this at the same time and invest in infrastructure and math and science education, we need to do this together. that argument is not being made by politicians today. >> they're doing us all a disservice. >> yes. >> wish people would talk like you do. >> we back them up, we elect them, we elected in 2010 we sent a bunch of guys there for a reason and that's why we had the

first debt ceiling issue. they weren't going to raise it another, they want spending increases stopped immediately but they were sent there for, what spawned the rise of that movement, what happened in the first two years of the owe bea ma presidency? >> well i understand the movement, there's no question there's a lot of sentiment out there for stop the world, i want to get off. >> i think these guys are arguing two plus two equals grain, they're not even coming up with a number. this does not compute. they're not speaking the same language. >> i understand the sentiment of the tea party. lot of folks are sincere and they're fed up but it's like the dog that caught the car. at some point you have to governor. this is a write where you have to govern and you've got to make compromises, got to listen to the other side. this is a big country, a lot of diverse views. people should remember even if they think their party is 100% right, the other 100% wrong

after this election there's almost no chance one party will be able to impoles its will on the other. there's got to be people who will work together and what we have to do in common sense america is get behind the folks in the house and senate who are trying, that's what he dave cote is doing. >> you're a georgia democrat. it's easy for you to say, you're one of the good ones. >> gentlemen, thank you so much. >> happy to be here. coming up a next on the markets and next hour mitt romney and president obama hitting the buckeye state. ♪ at optionsxpress we create easy-to-use, powerful trading tools for all. like our all-in-one trade ticket. we put strategies, chains and positions all on one screen. start trading today with optionsxpress by charles schwab. well, if itmr. margin?margin. don't be modest, bob. you found a better way to pack a bowling ball. that was ups. and who called ups?

you did, bob. i just asked a question. it takes a long time to pack a bowling ball. the last guy pitched more ball packers. but you... you consulted ups. you found a better way. that's logistics. that's margin. find out what else ups knows. i'll do that. you're on a roll. that's funny. i wasn't being funny, bob. i know.

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and the first-ever es hybrid. this is the pursuit of perfection. welcome back, everybody. things are looking a little brighter this morning after five days of losses for the s&p, this morning it's up by 6:8, dow futures up by 71.5. in europe some green arrows despite the protests in spain. oil price s are rebounding slightly but yesterday closed below $90. the ten-year note is yielding 1.64% and 1.2859 dollar/euro,

gold prices up to $1,758.60 an ounce. when we come back senator rob portman of ohio and staples co-founder and ceo tom stemberg. we have the ceo of lululemon to talk about the trends that helped the quarterly earnings jump by 50%.

let's get some parting shots from former u.s. senator sam

nunn. how many years were you in the senate? >> 24. >> we always talk about the way things used to be done and as you get older you're always talking about the good old days. i know that i am. it's really different now. can we get back to that where you guys are having beers and you got reagan working with tip and all that stuff? i don't see how you can do it. >> the good old days we had some really fierce arguments. we didn't agree on everything but in the final analysis people understood that the purpose of being elected was to try to make the government work for the nation and the country. >> it's a reflection of how polarized the population is as well as not just the guys that we've elected. >> it is. my view is common sense america has to rise up and so it's conservative, includes democrats but includes people who put the country first and -- >> is government too big, senator? the left thinks the entitlement state pathway that we're heading

down that road. >> government has been too big for a long, long time, in my view. it should be whittled back, but right now, one of the biggest things that goes wrong, and this is why so much frustration is coming in my view, congress is so busy with all the appropriations and spending and et cetera, et cetera, it doesn't give oversight to the existing programs. what's miss something oversight. and if we had every other year, if we had a two-year budget, and every other year was oversight, there would be some restoration of confidence in government because people would believe they aren't just creating programs and forgetting them and wasting money. they are looking at what's being spent. right now, that's not being done. it's all about the budget, all about spending and it has nothing to do with whether the programs are really working. we mentioned a minute ago, medicare and social security programs, the premise of those programs, the underlying foundation of them was longevity. it would be like having a

company making an annuity problem, annuities, guaranteeing people's payments over a period of time and missing the longevity by 15, 20 years. they'd all be completely broke. that's where we are. >> senator, thank you. >> it's been a pleasure. coming up, we're going to welcome tom stemberg, the co-founder of staples and ohio senator rob portman will join us to discuss the election and the battle for his home state. and then our american-made series takes us inside the business of beer, jim cook of sam adams talks oktoberfest success.

your money, your vote. we will talk campaign strategy and the politics of private equity with our guest host for the next hour, staples co-founder tom stemberg and battleground politics, ohio senator rob portman on the fight for the buckeye state. >> shares of athletic retailer lululemon have rocketed in the last five years. we'll ask the ceo christine day about her plans to keep the company growing and rumors that david einhorn is shorting the stock. >> it's squawktoberfest. ♪ we'll talk to the founder and chairman of the boston beer company, makers of sam adams.

the third hour of "squawk box" begins right now. ♪ >> welcome back to "squawk box" here on cnbc, first in business worldwide, i'm joe kernen along with becky quick and andrew ross sorkin, our guest host is tom stemberg, co-founder of staples and also co-founder of the highland consumer fund and of course a romney campaign surrogate. you're not currently pregnant, are you? male surrogates always -- >> how is he supposed to answer that? >> he's not going to try. >> a male surrogate, it's a different kind. so lots of great guests coming up with tom over the next hour including ohio senator rob portman. he's having twins.

no. the ceo of athletic apparel retailer lululemon will be on and founder and chairman of the boston beer company the maker of sam adams, jim cook, will be on. he's from cincinnati, too? >> he's from cincinnati. >> first andrew has your morning headlines. tempur-pedic is buying sealy for $2.20 per share in cash. and assuming debt. it plans to operate sealy independently after the purchase, a 23% premium to sealy's 30-day average price, the deal expected to close in the first half of next year. so many mattress companies get flipped all the time. i can talk about that later. microsoft could be in hot water again with the european union. the eu is considering whether to declare the software giant in breach of a 2009 agreement which ordered it to give consumers a choice of internet browsers. microsoft could face fines as much as 10% of sales. get a quick check on the markets, green arrows across the board in the u.s., the dow would

open up 72 points higher, nasdaq 10 points higher and the s&p 500 would open higher as well. look at asian markets, green arrows across the board as well. look at the shanghai composite up 2.6% and in europe we've also got green arrows so despite some of the issues going on in europe and else where, things aren't look so long bad. spain of course set to announce a new budget reform that includes spending cuts and new taxes. the country is trying to reduce one of the eurozone's biggest deficits, details released later this morning and live report from madrid in a few minutes. 40 days and counting to election day, ohio is likely to be a key swing state in the presidential race, joining us from cincinnati, republican senate rob portman, member of the senate budget committee and armed services committee also we have our guest host for the rest of the show with us, tom stemberg. i didn't know cook was from there. i think boston beer guy is from there. good to see you, senator.

>> great to see you, andrew. we claim jim cook, in fact we claim the recipe. his dad and granddad were brewmeisters in cincinnati. >> it's joe and i would know was it budaphol berger, shanglang, weedman -- >> his dad worked for hooty and they bought the old brewery in downtown cincinnati and they brew here in cincinnati. >> on west state street? >> there you go, man, yeah. >> i know exactly where that is. excellent. how has it, we now know once again i don't want to put a lot of pressure on you, senator, but you remember when bush had his brother in florida and looked like he wasn't going to deliver florida? >> joe don't do that to me. >> are you going to be able to deliver, not a big deal just the whole election. >> i'm not his brother but i am committed to him and look we're going to be fine. i spent the day yesterday with him, with he had great rallies,

incredible enthusiasm on the ground for us. i'm feeling good about things. frankly we've been outspent in ohio on tv, making up to are that, now that the general election is on, more resources and we've got the best arguments. the economy is in a shambles and it's bad here in ohio, bad nationally, what the president tried hasn't worked, he promised it would and it didn't and mitt romney has a great plan to move the country forward, including a great action reform plan for regulatory relieve his new ideas on trade and energy so it's all stuff that works in ohio. >> senator, i know in ohio the polling booths open october 2nd and there has been some speculation early voting that you can go ahead and start getting in on that. does that concern you at all particularly if you say you've been outspent to this point? >> it really doesn't. we have a big ground game, we've been handing out applications for absentee voting at the rallies, we have one tonight with rodney atkins, we'll have thousands of people there and

we've got a good operation so it is important to focus on early voting, you begin to bank votes as they say but we're doing a good job of it. >> senator, what are we in the campaign doing wrong so that the president can distort governor romney's positions and say he's going to lower the taxes on the rich and have you pay for it, all that kind of nonsense and yet the message seems to be resonating with some people. what are we doing wrong? what do we need to do better? >> i don't think it's wrong. it's the fact there have been a lot of tv ads saying the wrong thing about the mitt romney plans so the debates will be an opportunity for mitt romney to address these issues head on but also will now be able to put their own ads because we have the resources to do it, outspent 3-1 and having the ads from the obama team all negative, including mischaracterizing the tax plan make it a challenge. we can come back and correct the record. the tax reform plan mitt romney has laid out is great stuff. it's pro growth, the kind of thing we did in 1986 that ushered in a creative

unprecedented growth and it says we're going to make the tax code work better for all of us. it doesn't cut taxes on the wealthy. it keeps the same progressivity in the code. it creates 7 million jobs by increasing the efficiency of the economy, by simplifying the code and getting ohio and other states back on track. >> senator, there's been some confusion on the tax issue because romney especially in recent days has suggested if you're middle or upper class you won wo won't be paying a lot less in taxes. >> andrew, i don't understand the confusion. that's what tax reform is about, lowering the tax rate and broadening the base and so he is saying to wealthier americans you're not going to pay any less, you're going to have a lower rate which encourages economic growth but in fact the only folks that are going to get a tax break are middle class folks and that's another part of his plan which says for investment income as you know for savings and investment there

will be a big tax break for the middle class, but for those who are in the top 3%, 5%, whatever president obama is talking about in terms of tax cuts they're not going to get a tax cut. their marginal rate is going to be lower but by getting rid of some of the underbrush in the code, most engaged by folks in the top two rates is going to be just as progressive as it is now. the code will work better for all of us. >> we haven't gotten a lot of detail in terms of the specifics and deductions that are going to disappear. >> there's about $1 trillion tax expenditures in the tax code. president obama, simpson-bowles, do domenici-rivlin, comes out the same way, economists on the right, the center, to the left, tax reform makes sense, you lower the rates you broaden the base and that's what mitt romney is proposing. >> are we going to get specifics by the time november rolls around? >> probably not. . >> from either candidate.

>> i've talked to folks very involved in the 1986 tax reform including jim baker and they say the same thing mitt romney is saying, you don't dictate to congress exactly how it's going to be done. you need to work with congress to get it done. this is a president in barack obama who has not been able to work with congress on anything substantial, can't work with republicans on tax reform and debt and deficit reduction. romney would like to get something done. it does not make sense to lay out all the specifics. >> can you play president obama for us if we do a little bit of debate role playing here? that's what you're doing. how many times have you said, when i took office we were losing 800,000 jobs a month. have you repeated that a few times in. >> maybe a couple. maybe a couple. >> how about you want to go back to the same policies that drove us into the ditch in the first place? have you done that one a few times in. >> i'm going to use that one, that's a good one. >> i can't believe you had that on the tip of your tongue.

tell us what that has been like. >> it's an opportunity playing the role of barack obama to look into their policies more deeply. i did this in 2008 as you know and you come out of it frankly at least i do kind of scratching my head thinking gosh here's four years of not meeting any of the measurements that the president set himself as to what the economy would do. unemployment is 50% higher than he said it would be if we do the stimulus and for the next four years i don't see anything new. he's proposing another stimulus, it's 100,000 new teachers taking the federal government heavily in record debt and deficits and spending more money in states. nothing new. >> how does the president get away with saying we're going to divert the millions we're not spending on war and divert it into domestic spending. the problem is it wasn't spent,

it was borrowed. he gets away with it. >> there's also no savings because we're drawing down on afghanistan, so the savings you're talking about are considered to be a gimmick. that's why the proposals in the talks didn't include it because it didn't pass the laugh test so the president talks about a budget proposal that cuts the deficit by $4 trillion, when you look at it he's taking credit for over $1 trillion congress has already done, $1 trillion roughly in the oco, he raises taxes but that's about it, so there really are no savings in the president's budget. his own budget proposal got no votes from democrats or republicans, because it added $11 trillion to the debt over the next ten years. so all these things need to come out. we're in trouble as the country, and we need to restrain spending and the president is not laying out a plan to do that. >> i like what happened with the

redskins. any time you can beat anything in washington it's good. you may get a chance for the reds with the nationals. that would be nice. >> what do you think about that? i'm going to sneak out to the game today, joe. >> are you really? >> yeah, yeah, rodney atkins is in town, he's a big red fans. it's a midday game. >> harwood is beside himself, but the redskins and then what he knows is likely to happen to the nationals. anyway, senator, thanks for joining us today. it's a beautiful, beautiful, i can almost see the hooty plant behind you. >> i think it's right back there as the sun is rising on the breweries in cincinnati. good to be with you guys. >> beautiful sight. >> thank you, becky, andrew, joe. >> good to see you. >> thank you very much. let's get to spain and today's budget unveiling there. steve sedgwick joins us from madrid. hey, steve. >> reporter: hey, becky. interesting hearing your debate about stimulus in the u.s.

economy. they don't have that luxury here. they have the debt and can't put any stimulus in here because the markets are punishing them. they haven't got a bernanke. the spanish yields are touching around 6% that's' ringing alarm bells because if the yields pick up too much he has to go to the ecb and say we'll agree to your conditionality. he doesn't want to give away sovereignty. so he has to prove to the markets and ecb they don't need external conditionality, they can handle this economy and the missed deficits on their own despite the fact it's in recession, we have 25% unemployment here, they are saying more austerity is the way forward to get the confidence of the markets, the confidence of european partners. the problem is i'm in the spot where the problem came to a head over the last couple of nights. the public don't want more austerity. they think it is causing part of the problem and in some ways they may be right for a country that has got over 1 million

unsold homes, 25% unemployment, 50% youth unemployment, become in recession since december last year, they are questioning whether more cutbacks is the way forward. but the government hasn't really got much choice to say because those yields keep picking up on that ten-year paper. as if rajoy didn't have enough problems he has to worry about catalonia and other regions which are demanding more devolved assemblies and more control over their finances right at the time he wants to rein in their control over finances and he doesn't know how much the banks are going to cost as well. there are guests and estimates which are going to be given a full number tomorrow from oliver weiman, could be 60 and 100 billion euros needed to prop up the spanish banking sector. lot of headache for rajoy. we'll find out what he's going to do it. >> thank you so much. coming up, shares of lululemon, it has h a meteoric

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welcome back, everybody. lululemon say high end athletic retailer, yoga clothes, the company's stock is up more than 50,000 since its ipo back in 2007 opinion joining success christine day, she's the ceo of lululemon athletica, and christine, thanks for being here today. >> oh, you're welcome. my pleasure. >> the street certainly liked what it heard when you reported your earnings, raised the outlook and said that you were going to be guarding your property very closely, trying to make sure there aren't any knockoffs out there. give us an update for where things are since you last spoke to them about that. >> we just recently gave guidance and we feel really good about where we are in the market now and very confident in our sales plan so and very confident in our product and the reaction to it. >> you have to have heard rumors dived einhorn is looking at

lululemon and may bring it up at the value investing conference next week. >> we've heard that rumor a couple of times. it's always interesting to hear what he thinks about our business, but the real sit we have a tremendous amount of confidence in our business and we're not really concerned. >> there has already been a lot of talk of reasons why david einhorn might look at it, obviously you've been very successful at the stock price but the company right now trades at 49 times earnings, and any time you look at something like that, people start to assume that maybe it's priced to perfection. >> you know, i think valuing the company is the market's job and my job is actually creating value and i think we have a healthy balance sheet, one of the top business models in retail while delivering phenomenal growth, so i think our story is a very intact, had a great response from guests, we've got a great product story

so i think we can stand on our record. >> the truth is, becky, nobody's made any money shorting lululemon over time. and the 20% of the stock that's held by shorts are people who have to cover at some point in time creating further upward pressure on the stock. this is an opportunity in some ways >> christine, let's talk about that. if you are protecting your product because a lot of companies try to do the knockoff, how do you make sure that you stick with your product and that nobody can go in and try and rip it off? >> i think there's a couple of different strategies, one is protecting the core, which you've seen us do with our ip protection around our key pants and styles that were in for a long time and the second is constant innovation and it's working on new product, new detailing, and we're in a fortunate position to be able to continue to invest in our product with the way we do our margins, vertical integrated retail so all of those things give us a competitive advantage to invest at a level the more price conscious brands can't do

and our guests recognize the difference in that product. >> christine, you've got a perfect present for becky to give joe this christmas, the new fluff off line. >> tell me about it. fluffer line? >> fluff off. >> fluff off. so i'm wearing pieces from our what the fluff collection which is a run collection from women today. >> excuse me, he oh that's a play on words, christine. you know that. >> this is the lightweight down product that we have for running and so i'm wearing a vest and a skirt that's part of the run collection, but behind me we also have some pieces for run for women, and for men we have the fluff off line, which has zip-off pieces of down which is why it's called the fluff off but we did think becky might want to give that to you. >> we need the camera to pull back so we can see this, too. >> i know you remember my experience was i wore my boxers with the pants. >> big mistake. >> oh my god it was like the worst, i wasn't in a place where

i could take them off and there was a lot of unsightly adjusting and stuff. so you don't wear anything, you wear lululemon or you wear nothing at all. that's what i'm saying. is that right? there's no underwear with lulu, right? >> no, we have great boxers for lululemons. >> you don't wear them with the rubbing shorts. >> no, not if you have a liner. >> it's built in. >> christine, quick, you guys have spent a lot of money, time and attention on the in-store experience, but how do you think about the e-commerce experience right now? it doesn't seem like you're spending a lot of must be on advertising online right now on that issue. >> we spend about 0.0000, which having the phenomenal 90% growth that we have on e-commerce, i think speaks for itself and it's driven by product. it's driven by a relationship in the stores and the guests really seeking us out, and so it's all

organic growth. >> is that something that changes over time? >> i think you never say never. i think what we always look for is a real true authentic connection with the guests and that we've really earned it rather than that we've bought it, and that's been our philosophy all along, and the guest have resonated with that because they're always in choice about choosing our product and our job is to keep it the best product ever and be in an authentic relationship with the guests and we've built the brand on that and continue to see that as our strength. >> christine, thank you very much for joining us today. pleasure talking to you. >> pleasure, thank you. >> thank you. >> they make boxers? >> yes, they make boxers. >> you just don't wear them with the tight -- >> you don't wear two pairs of boxer shorts. >> they're like undergarment thing built in. >> not on these pants that i have, there isn't. stretchy, weird, maybe, i don't know. >> this squawkward moment has been brought to you by joe kernen. >> she has a fluffer brand and a

fluff off thing. it was awkward. >> only one going commando, it was you. >> breaking economic data at 8:30 a.m. eastern, weekly jobless claims, durable goods numbers for august and second quarter gdp numbers and after we get the data out of the way we'll quick off squawktoberfest, founder and chairman of boston beer will join us, e jim cook. he sent sam adams to start it. there there's something in "the financial times" about squawktoberfest. the entirely new lexus es and the first-ever es hybrid. this is the pursuit of perfection.

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welcome back, everybody. if you haven't heard yet the real refs are pack. the nfl has reached a tentative agreement with its referees ending a labor dispute that kept them off the field for the first three weeks of the season. the refs will be back on the field tonight for the browns/ravens game. we'll be keeping an eye on shares of retailer dollar general. the stock is under pressure after the company announced a 30 million share secondary offering, sold by existing shareholders and the company is not receiving any of the proceeds from that offering. a $23 million mansion in foreclosure is said to go to auction today. the 20,000 square foot spread is home of former tech millionaire rodney hunt. the home was featured on mtv's

"cribs" can has a bowling alley, a basketball court and a 15-car underground garage. the mcclain virginia property sits on the potomac and the most expensive home to go into foreclosure since the market crashed in 2007, the auction is scheduled for 11:30 a.m. eastern time and diana olick will have more later this morning. when we come back, minutes away from a flood of economic numbers. we'll get durable goods numbers for august and final revision of second quarter gdp. u.s. equity futures are indicated higher, dow futures up by about 78 points.

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welcome back. you know that great story we told but the $23 million mansion going into foreclosure and auction today at 11:30, never mind. this just in, actually rodney hunt has breareached an agreeme with bank of america, made a payment agreement and the auction is canceled so if you wanted that house, too bad. can't get it. >> i was, anyway, bad joke. we are seconds away from weekly jobless claims.

u.s. equity futures ahead of the numbers we do have green arrow this is morning, dow looks like it would open up about 76 points higher, nasdaq and s&p 500 would also open higher. before we go there, mr. liesman the professor is here. what should we be expecting? >> interesting numbers expected on the durable goods front, minus 5.6 is the estimate for dow jones and that is mostly because of what's going to happen to boeing aircraft. that's the top line number, it went from something like a couple hundred deliveries to one in august, it's already bouncing back in september, we'll be looking closely at the x transportation numbers, especially the business investment numbers down for two straight months and interesting you've seen consumer confidence pick up a little bit. we don't know if business confidence picked up a bit, mo are key for what is happening with the economy. looking for jobless claims in the 375 area, in the demilitarized zone, neither hot nor cold, 375, right in the middle of progressing which would be 350 and getting worse would be 380, 400, those are the

two keys. there's a lot of data, watching a couple of surveys, the kc fed and the chicago manufacturing survey, going to give us a running on the economy. last week was 382. >> rick santelli is standing by at the cme in chicago and he's got the numbers, rickster, the numbers? >> all right, well, here we go, the buzzer rings. let's start out with gdp, this is pretty surprising to me. we see our last look, our third time around the block on second quarter gdp and we shaved 0.4, down to 1.3. the internals haven't really changed much on the price index, consumption ticked down 0.2 to 1.5. if we look at durable orders oh my god this is shocking down 13.2%. we are looking for down 4%, then it was down 5%, this is much more than we were looking for and last month they shaved a

chunk off, take out transportation down 1.6, this is pretty big time. initial jobless claims i have to step out of frame a second because i can't really see them from this perch with so many data points out. looks like 359,000, so that indeed is better than expected news, but i think if you have to summarize what we're looking at in the rear view mirror on the recessions really big time, and remember one month from today we'll get our first look at third quarter gdp and that will be significant especially when you look at the calendar and all the events that may be coming up in early november. back to you. >> okay, thank you, rick. steve, make sense of this. >> i wish i could. first of all it looks like the durable goods numbers, let's go through these quickly, huge drops in motor vehicles as well so that was added on. you went up 12% in july, down 11%, and you eeked out a small

gain, much less than economists hoped of 1.1% on new orders for capitol goods, ex-aircraft, a proxy for business investment, while did you a big revision downward in july so i'm not taking a whole lot of strength from that. the minus 1.6 number on x transportation i'm guessing another big decline in defense, defense aircraft was down and where is defense overall? it looks like defense capital goods down 40% so this is a thing that has to do with maybe we're seeing some of the -- >> is this the fiscal cliff? >> it wouldn't be the face fiscal cliff as much as what is happening in afghanistan and iraq, and the drawdown. i have to call the pentagon and see if they'll give us a general idea on spending. we have been chronicling over the last 11 years the complete inability of the government to count what the government spends and/or hires, it's been a source of amazing frustration. i get they have trouble with the

private sector but you'd think they'd get the hiring of government officials or government workers to be right. on the claims number, a little bit towards the things are getting a little better number. rick, i didn't see the continuing claims number. some economists were looking for that gauge for how they do on what their sense of unemployment is as well. >> i'll run and check it while you keep talking. i have to move out of frame. there were so many data points today that we scrolled right off our screen on that one. continuation claims were 3.27 million. >> some economists use that to suggest what is happening with the unemployment rate, ticked down from call it 3.3 in august, now 3.2. some question as to whether or not, let me just say if there's anything from illinois, what's happened with the chicago teacher's strike and how that may have factored it in. states with decreasing claims. no, illinois does not show up in

the decrease or increase so that has not had a huge effect. maybe i'll call the labor department. >> look at the red area, usually chicago and illinois are in that real red section, steve. >> and then i haven't had a chance to call up gdp. i can tell you corporate profits which had originally reported at plus 1.1% in the second quarter, now 2.2%, those are down -- >> steve are you shocked gdp saw that big of a revision third time around the block? >> i'll not because jim o'sullivan at high frequency economics was right. rick, did you see was it sales or demand? >> i haven't had a chance to comb through and not saying, mr. sullivan, my hat's off to him if he predicted it. i'm questioning that it's just a significant percentage revision after we should have tightened up and seen all the final durables and all the final inventories. >> rick, you and i argue about

macro things and the great thing about us is let's not get hung up on tenths. i don't know if it was 1.8 or 1.7 i'd argue this is a strong economy. >> but if it revved up to 3% we'd all be talking about it a whole lot more. >> exactly but now it's down to 1.3 it's still a weak economy just like it was at 1.7. >> steve, you know what? this is wonderful because for viewers that don't like to go into the weeds with data, things like gdp, retail sales, durable goods, these are big, lofty numbers, and my opinion, we could talk about the nuances of qe3, we could talk about how the central bankers are going to save the world, but truly, no matter what programs we've implemented up to this point, these big numbers, the durables, the gdps, they are depressingly weak. >> guys, there was for reuters just to tell you one thing about that gdp number, a guy from 'roide ererser erer erers reute

range was 1.4 to 2%. >> first thing is first here, becky, another number waiting for in all of the day tax the benchmark revisions, this is going to be interesting. it gets beyond the weeds here. they're telling us they're going to raise the level of march 2012 employment by 386,000. they go back and they get actual data from the states, which why they can't do this on a real time basis is another question, maybe we'll have a chance to debate that but they do go back, get this data from the states and rebenchmark where the level is of unemployment and they redistribute it over months. they're raising the total level going by 386,000, the dataites, forecastites coming in seeing 150,000 so it's about double. so we'll have 386,000 distributed out over 12 months prior to march 2012, it also raises the question where

employment is right now because it changes the benchmark. if i can look quickly they revised down consumer spending in the second quarter, they rerised down durable goods, business investment revised down and what happened to government? government revised up just a tick to a smaller decline of 0.7%. so it looks like it was pretty across the board, rick, not anything big that they missed. what we do know is that we don't get all the service sector data that the government creates, another thing i'm complaining about. i'm harping this morning on the government. we do a great job of measuring the economy in the united states of the 1950s. you can get five different prices for turkey but it's a service sector economy and we don't get any real time data on that. sometimes that's what surprises the economists here. >> i'll thank steve and rick our guest host remains tom stemberg, sticking around for the rest of the party. he's a really know campaign surrogate and founder of staples and i wanted to get your

thoughts on staples. i know you're not involved right now but there's been lots of talk about what's happening to that company including the possibility it may get bought again possibly even by bain. >> i don't want to talk about staples but the industry has struggled. they try to be technology player bus they don't have apple, the leading technology vendor. we got blocked inspect ftc, the if, tc was wrong and i think industry would benefit greatly from a merge are of three down to two. >> office depot. >> office depot, office max and staples, there really should be two companies and finally becky's issue about internet taxation. when people don't pay the use tax they owe when they order over from amazon or someone and the states are losing money on an existing tax and -- >> penalizing the big box retailers. >> the big box retailers are penalized. if that gets fixed, the republican governors are in

favor of it now, those three things would take an ugly looking story today and make it more attractive. >> is it a secular or cyclical story? it feels secular to me. >> there is a secular aspect and cyclical aspect. the fact of the matter is we have 23 million americans unemployed or underemployed. >> in terms of the shift for this kind of stuff. >> staples is the second biggest online retailer in the world so that should not hurt staples. >> second biggest in the world? >> correct, right behind amazon, $12 billion roughly. >> why don't -- that's something, did you know this? >> i didn't know that. >> so why aren't they doing more with that aboutis? >> if you read the restructuring plan, that's what they're going to stress that more i believe. >> you would not be a buyer yourself. you're now back in the private equity business yourself? >> we do small emerging companies like j. mclaughlin so this is outside of our sweet

spot so to speak. >> you want to talk politics or business? >> steve's got something to point out with a number. >> one of the things that showed up maybe in the second quarter of gdp was the drought. you had a collapse in farm investment from main us 2.2 to minus 7.9. there were declines in a lot of other things as well but the big changes, i didn't look for it in the table, there it is, the impact of half a point of gdp, something to watch for. >> tom we still have to talk politics, a lot to do before this program is over. becky? when we come back we are celebrating the harvest with "squawk box" oktoberfest. up next we have jim cook founder and chairman of the boston beer company, the brewer of sam adams will give us an update on the beer industry in the united states and in europe. that makes sense, the drought thing.

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i am preyity good at drinking beer. ♪ da, da, da, da, >> pretty good. >> that's what they got. >> on the way out we want to hear "pretty good at drinking beer" a prime time country song.

sam adams, sam would have been 290 years old today and his namesake beer is a favorite among craft brewers. he was a great patriot, a lot of good quotes that would be so relevant of today. although a lot of people wouldn't like it. joining us is jim cook, founder of the boston beer company the maker of sam adams. how are you doing? i didn't know you were from cincinnati. >> yeah, born and raised there. >> and i found out it wasn't the hooty brewery. someone told me it's the shangling brewery. where was it? i get it right from you. >> it was originally building in downtown cincinnati and we bought it 17 years ago as we expanded out of boston. >> you got a rich history, i don't know how many local brews, there must be 20 that i grew up with, i didn't grow up with them but i knew all of them and in cincinnati, there's a big piece in "the financial times" i guess

oktoberfest they're confused in munich because it's september but it's already started and beer prices are so expensive because of barley. have you experienced that? >> we're just starting to. the drought has affected all the agricultural products including barley, so beer prices are probably going to be seeing some upward pressure, like any other food. beer is food. so grain prices affect it. >> where are we now in the, we keep seeing jockeying in the spirits business between wine and harder spirits and then beer. it seems to, i don't know how you measure it. does it correlate with economic activity? when does beer become popular again? >> it's been very interesting seeing what happened to beer in the united states during this great recession that we've been in, because on one hand, you know, the mass domestic beers, the big things, the bud, miller and coors, they've been

declining, but at the same time craft beers like sam adams have actually been growing double digits every year through this recession. craft beer sales so far this year are up about 15%, despite the economy. >> is it the taste, jim, or can you get a higher alcohol content in those? >> it's basically the same alcohol content. it really is just people trading up and it's kind of i think when times are bad, people are willing to treat themselves to small luxuries and a six-pack of sam adams is something that's affordable to people and so for the money you got in your pocket, you can buy six bottles of really great beer and sort of upgrade the event a little bit. you might not go out and buy a $40 bottle of wine but for eight, nine bucks you can get six bottles of great beer. >> jim, you've seen a lot of

consolidation going on in the beer industry, not among the microbrewers but in the larger context. what does it do to the business? >> well it's really changed the american beer business. today over 90% of the beer made in the united states is made by these two enormous global brewing conglomerates, one of them headquarters in london and the other headquarters in belgium, so the american beer business today in terms of american ownership is really the very small craft brewers like sam adams. >> you're the biggest american beer, right? >> yeah, but we have one -- >> do you think that plays with the consumer, meaning does the customer appreciate that point when they go out and buy a budweiser and realize it's owned by imbev? >> i don't really think so. i think they like the taste of budweiser. they drink budweiser, they're fine with that and sam adams

isn't competing with budweiser and miller and coors. they're sort of like the mcdonald's and burger king and wen wendy's. we're fine dining and not really in the same business in a lot of ways. >> jim, when you got out of college and ended up applying for a job, did mitt romney interview you for a job? >> yes, actually mitt and i were in the same jd mba class at harvard and i remember meeting him and thinking gosh if this is a quality of people going into politics i better stick with beer. i think mitt was going to be going to beer. >> you, mitt romney, benjamin netanyahu and jon paulsen and i thought i was smart buying in your ipo. he put $13,000 into your company back when it started, right? >> it was john's first, you know, big hit back in 1984.

things turned out okay for him. >> what is the maximum amount of alcohol you can put into a beer? is there a law? >> that's a good question. >> is there a law? >> no, it's more of the laws of physics and biology, and we've been working on that for 20 years, sam adams triple dark became the strongest beer in the world in 1992, and we're releasing the latest version of sam adams utopias, it weighs in at about 58 proof, so you know, you can push it pretty high. >> wow. jim, the reason i'm asking that's what i had. the liquor store in where i lived gets one six-pack of beer that was 57 proof and someone said here, try this. and he said try it for the taste, and you know, i drank it,

i'm telling you, one bottle, it was like drinking a whole bottle of wine, i think. and i didn't have any more. they only had one bottle, that's when i really got angry, but. >> yeah e and it's $170 a bottle. >> it is? >> a bottle. >> it is? >> yeah, that two-ounce shot you had was about a $15 shot of beer. >> no, i drank the whole bottle. >> he drank the whole bottle. >> i didn't know anything about it. and then he told me afterwards, but i was already, man, it was like that is the best beer i think i've ever had. because normal beer -- >> thank you. >> yeah. normal beer, those first six go down so smoothly, so quickly. >> if you're going to drink six bottles of utopius, call 911 before you start so they can get you to detox. >> jim, thank you and good luck. october is a big month, big more for all of us, oktoberfest. >> yes, it is. cheers. >> you following the reds still? >> oh, he's got a before.

>> hopefully no-hit. last time we made the playoffs, you know, no hit. >> it will be a better year. >> let's hope so. see you later. >> cheers. >> i should note, it is samuel adams' birthday today. >> he said that, 290 years. >> sharing with henry and max. >> oh, that's right. >> they have the same birthday. >> along with google. >> and google. these kids were born on the right day. happy birthday. coming up, a bill coming due for the u.s. postal service, but will it get lost in the mail? find out next when we return. ready or not, the "stock of the day" is coming up. you're watching "squawk box" on cnbc, first in business worldwide. [ male announcer ] introducing a stunning work of technology. introducing the entirely new lexus es. and the first-ever es hybrid. this is the pursuit of perfection.

welcome back to "squawk box." checking futures right now, we've got green arrows still across the board. it's gotten better since the show has progressed. the u.s. postal service is set to default on a $5.6 billion payment that would prefund retiree health benefits. that payment is due on sunday. the service also defaulted on a payment that was due august 1st due to its ongoing financial

problems. the default does not affect current retiree health benefits, though. the postal service says it loses $25 million every single day because of dropping mail by. that is a remarkable statistic. coming up, we're going to get final ghothoughts from our cohost. tomorrow on "squawk box," two hours with the journalists who helped bring down enron, on the big banks, market scandals and investor confidence. and political strategy ahead of next week's presidential debate. don't miss "squawk box" tomorrow morning starting at 6:00 eastern. i'm only in my 60's...

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don't wait. call now. o0 c1 a thing that helps you wbuy other things.hing. but plenty of companies do that. so we make something else. we help make life a little easier, more convenient, more rewarding, more entertaining. year after year. it's the reason why we don't have customers. we have members. american express. welcome in.

"stock of the day," hartford financial. prudential financial is reportedly close to an agreement to acquire the company's individual life insurance business. "the journal" says the two could reach a deal later today. investment bankers and analysts have valued the business at about $1 billion. let's get some final thoughts from our guest host. you said, you know, the 47% numb number, you say he was wrong about that. what do you mean? >> i think he's wrong with the following sentence. you don't have to agree with me,

joe, but i think a lot of people get money from the government. and the theory is they're never going to vote for mitt. the fact is, as you run trillion-dollar deficits and hope that china keeps buying the bonds, at some point some portion of those folks are going to figure out that this gravy train can't go on, and it's going to jeopardize their kids and grandkids, and they may vote the other way. >> in the old days people voted aspirational. democrats voted for ronald reagan. i'm just wondering about whether the aspiration is enough to put a candidate over the top at this point? >> i think the reality of our economic station, with 23 million people unemployed, 47 million people on food stamps, i think the american people are going to wake up and say, you know, president obama came in with great promise. he's a heck of a nice guy. but nice guys don't always get the job done. and he's not getting the job done. >> all right. we'll see. we hope to see you again. i don't know if we'll see you before november 6th, but thanks

for coming in today. >> thanks for having us. thank you. >> and good luck with, you know, you doing all the prenatal stuff as a surrogate that you need to do? >> absolutely. >> very good. any vitamins? what else, becky? >> vitamins is the big thing. the diet. >> "boardwalk empire." pasturized milk. we've got to run. make sure you join us tomorrow. "squawk on the street" starts right now. ♪ hey give me everything tonight ♪ ♪ give me everything tonight good thursday morning. welcome to "squawk on the street." i'm carl quintanilla along with melissa lee. david faber. jim cramer is off today. a slew of data today. jobless claims were decent, down 26,000. a miss on durables, although there are some internal factors there. also revised second quarter gdp, although those numbers are almost three months old. europe, a lot of speculation around the globe about what the chinese central bank may or may not do next week as we've got